Homeownership at Any Cost
How the National Association of Realtors Convinced Taxpayers to Subsidize the American Dream
By Andrew Jeffery
(Published by FT Press, in conjunction with Minyanville.com)
Wall Street has been occupied. Mortgage brokers shut down. Bankers, vilified. Even struggling homeowners, behind on their mortgages, receive scant pity as they are forcefully removed from their homes.
But what about real estate agents? By and large, the people paid to advise us on what’s often the biggest financial decision of our lives, have gotten off scot-free, avoiding the scorn so heavily heaped on nearly every player in the real estate game.
It’s a mystery to which every one homeowner – and prospective homeowner – should want an answer. And here it is:
Cirios Real Estate’s Andrew Jeffery chronicles the influential role the National Association of Realtors, or NAR, played in designing US housing policies that enriched real estate professionals by making buying a home cheaper and easier than ever before. NAR argues that by subsidizing home buying, the government can help American families realize the American Dream, making upward social mobility possible for everyone.
But at what cost?
Tracing a path that begins in Depression-Era politics and the New Deal, we follow real estate industry lobbyists through the Great Depression, World War II, the Civil Rights Movement and into the housing boom. We examine accusations that NAR was an essential, albeit often overlooked culprit, in blowing the housing bubble, the bursting of which nearly took down the entire global financial system.
To read this newly published e-book, click here: (Non-Kindle owners can use read.amazon.com to read it online)
Some of the highlights of the piece can be found below:
Critics argue that NAR’s positions are laced with a fundamental contradiction: claiming to believe in free markets even while zealously fighting for generous government subsidies to support homeownership. (read more)
It is a sad irony that the very policies that over decades shaped the U.S. real estate market and eventually culminated in the bursting of the housing bubble were advanced under the guise of supporting the American Dream of owning a home. (read more)
In President Roosevelt’s own words: ‘The number of new refrigerators means something besides just plain dollars and cents. It means greater human happiness.’ (read more)
With FHA insuring mortgage payments and Fannie Mae providing liquidity in the secondary market, homeownership, once lauded for its status as a private enterprise, had become a market almost entirely supported by the federal government in less than a decade. (read more)
With affordable housing options in short supply, swelling ranks of poor minorities piled into inadequately funded public housing. Meanwhile, whites flocked to the quiet suburbs and newly minted single family homes that were being built with government-backed development loans from the FHA. (read more)
In pre-1968 America, private residential development deserved an infamous appendix: ‘Whites Only.’ (read more)
White Americans received an astounding 98% of federally approved mortgages between 1934 and 1968. (read more)
An FHA underwriting manual from 1938 stated that lending restrictions should include property-specific provisions for reasonable items like “adequate light and air,” but also specified “prohibition of the occupancy of properties except by the race for which they are intended. (read more)
Lenders were still reticent to make loans in poor, urban neighborhoods. They were, however, happy to take local residents’ deposits, turn around, and lend out the money to middle class families buying homes in the suburbs. (read more)
The ensuing refinance boom set off a six-year speculative housing orgy, financed by cheap loans and the expansion of a niche segment of the mortgage market called subprime. (read more)
During the boom years of 2002–2006 … real estate agents collectively earned between $400 and $500 billion in commissions. (read more)
As the housing market began to crumble, NAR’s message to consumers was clear: ‘Right now may actually be one of the best times to buy a home. The outlook is for home prices to increase next year.’ (read more)
Perhaps as a thank you for NAR’s $40 million ad campaign, USA Today crowned NAR Chief Economist Yun the top economic forecaster in 2008, despite having an impeccable record— for being dead wrong. (read more)
NAR is advocating for a near-complete abdication of the mortgage market to the federal government—in the same letter that begins with a statement in support of free markets. (read more)
If owners are so much better off than renters, why should mortgage interest and not rent be tax deductible? The answer’s easy—because renters don’t generate real estate commissions. (read more)